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Nigeria gets local content law for power sector, others

By Emeka Anuforo, Abuja
22 February 2015   |   10:39 pm
• Citizens to take priority over foreigners • Firms to give first consideration to made in Nigeria goods in contracts award • Utilities to submit yearly localisation plan A NEW era is set to unfold in the electricity power sector as the country finally gets a local content law with far-reaching provisions for prioritisation of employment of Nigerian…


• Citizens to take priority over foreigners • Firms to give first consideration to made in Nigeria goods in contracts award • Utilities to submit yearly localisation plan

A NEW era is set to unfold in the electricity power sector as the country finally gets a local content law with far-reaching provisions for prioritisation of employment of Nigerian workers, technologies and consultants.

  Among other things, the law mandates the electricity power utilities to first give consideration to goods and services of Nigerian origin in the award of contracts.

  It specifically mandates all operators in the sector to first give consideration to suitably qualified Nigerians for employment and training. 

  The law, which was obtained by The Guardian at the weekend, is entitled ‘Regulations on national content development for the power sector’ and it took effect from December 24, 2014. It was signed by Chairman of the Nigerian Electricity Regulatory Commission (NERC), Dr. Sam Amadi.

  In an interview with The Guardian, Amadi stressed how the power sector would become a job spinner with the new law.

  The policy provides that all licenses shall have the development of Nigerian content as a key component of their philosophy in their general operations, including the execution of their projects.

It also requires NERC to establish, maintain and administer a Joint Qualification System (JQS) in consultation with the Nigerian Content Consultative Forum (NNCCF) in accordance with provisions of the content law. The JQS is to constitute an industry databank of available capabilities and shall be the sole system for Nigerian content registration and pre-qualification of contractors in the industry, a source for the verification of contractors’ capacity and capabilities, a source for information in the review of applications of Nigerian content, and the data bank for national skills development pool.

  The JQS is also to be used for the ranking and categorisation of all service companies on capabilities and Nigerian content.

  It directs all operators to ensure that first consideration is given to qualified Nigerian companies for the supply of goods and works, and for the provision of services.

  “All licensees shall develop a framework for the development and promotion of Nigerian content. All licenses shall maintain an Annual Nigerian Content Performance Report covering all their projects and activities in the previous financial year. The Commission shall review the reports and issue relevant directives where necessary. The Commission shall promote continuous growth in Nigerian content in recruitment, procurements, implementation of projects, operations, consultancies, etc, in the Nigerian Electricity Supply Industry (NESI) by ensuring strict compliance with this regulation,” the document noted.

On contracts/procurement

Under contracts/procurement, the law provides:  “All licenses shall give first consideration for goods made in Nigeria and services provided by Nigerian firms in award of contracts. All operators and project promoters shall consider Nigerian content when evaluating any bid at commercial stage and the bid containing the highest level of Nigerian content shall be selected.”

  Under consideration for employment and training, it noted: “All licenses shall first give consideration to suitably qualified Nigerians for employment and training.  For each of its operations in respect of management positions, a licensee must ensure that not more than five per cent of such percentage as may be approved by the Commission from time to time is retained by expatriates.

  “The application for employment of an expatriate shall be in the form prescribed by the Commission with appropriate justification showing that no suitably qualified Nigerian has been found for the position following diligent search. The approval of the Commission in this instance does not preclude compliance with the requisite immigration procedures.

  “All operators and companies operating in the NESI shall employ only Nigerians in their junior and intermediate cadre or any other corresponding grades designated by the operator or company. All unskilled labour should be locally sourced.

  “Where a Nigerian is not allowed to progress within the organisational structure of a Licensee because of their lack of training in a particular area, the Licensee shall prove to the satisfaction of the Commission, that the Employment and Training Plan of the Licensee provides for such trainings and efforts have been made to train the employee.”

  In the area of maintenance of employment and training plan, the regulation directs that Nigerians should be given first consideration for training and employment in the work programme for which the plan was submitted.

  It stressed: “Licensees shall maintain an employment and training plan for each financial year. The said plan shall be submitted to the Commission upon request.

  “The employment and training plan shall make provision for succession planning to enable Nigerians assumes positions that may be occupied by expatriates. The training plan shall take into cognisance the full involvement of Nigerians in any research and development activity undertaken by the company.

  “Any collective agreement entered into by the licensees with any association of employees regarding their terms and conditions of employment shall contain provisions consistent with this section.”

  The need for Technology Acquisition Plan by each of the utilities was emphasized. 

Technology acquisition report

Failure to submit an acceptable technology acquisition report when requested by the Commission would render a defaulting firm liable to fines and other sanctions as may be determined by the Commission under the applicable laws and regulations.

  According to the policy: “Each Licensee shall maintain a Technology Transfer Plan. The plan shall contain details of various technologies deployed by the operator and the proposed modalities for transfer to Nigerians where applicable. All licenses shall give full and effective support to technology acquisition by encouraging and facilitating the formation of joint ventures, partnering and the development of licensing agreements between Nigerian and foreign contractors and service or Supplier Company’s agreement for all such joint ventures or alliances shall meet the requirements of Nigerian content development to the satisfaction of the Commission.

  “Where necessary, the Commission shall consult and make recommendation to the relevant arms of government on appropriate fiscal framework and tax incentives for foreign and indigenous companies who establish facilities, factories, production units or other operations in Nigeria for the purpose of carrying out production, manufacturing or for providing services and goods otherwise imported into Nigeria.”

Professional services 

Under professional services, the new law gave Nigerian professionals and consultants’ prominence over their foreign counterparts.

  It noted: “Engineering services shall be rendered by Nigerian engineering companies registered with relevant regulatory authorities. Foreign engineering consultants/firms may only be engaged when the required services are rendered in collaboration with the firms licensed to provide such services.

  “Licensee shall obtain insurance and reinsurance services from companies licensed by the National Insurance Commission (NAICOM) for such purposes. Where there is a reasonable need for a company to engage an offshore insurance firm, prior consent of the Commission must be sought. Application for consent to engage an offshore insurance firm shall be in the format specified by the Commission and include clearance by the NAICOM such foreign firms.

  “At the end of each financial year, each company shall maintain a register of all companies through which insurance coverage was contained in the past financial year, the classes of cover obtained and the premiums paid for such coverage.”

  It further stressed the need for legal services in the sector to be carried out by legal practitioners qualified to practise in Nigeria, noting that foreign consultants may only be engaged in the NESI when the required services are rendered in collaboration with a firm of Nigerian legal practitioners registered by the Corporate Affairs Commission (CAC).

  Under Financial and Capital Market Services, it noted that foreign financial and capital market services may only be engaged when the required services are rendered in collaboration with firm licensed to provide such financial and capital market services in Nigeria.

  “Financial and capital market services in the sector shall be rendered by the Nigerian registered companies licensed by and in good standing with the relevant regulatory authorities.”

  Responding to questions on how the Commission planned to enshrine a new era in Nigeria’s local content development, Amadi told The Guardian that the regulation was designed to ensure that the value additions that would come out of the sector really improved the nation’s economy.

  He noted that the law did not create a new agency as witnessed in the oil and gas sector, noting rather that a Nigerian Content Consultative Forum (NNCCF) would be established to carry out a survey periodically to determine the local content participation in the sector.

Gains of new regulation

He said that NRC would establish penalties to ensure the effective discharge of its duties and to promote compliance with the new Regulation.

  Amadi noted: “The idea here is not to restrict trade of any sort, or to impose hardship or difficulties for operators in this industry. Rather, it is to ensure that we see significant localisation or nationalisation of services, of employment and of technology.  Basically, these are the three areas of focus.

  “We did not go to the National Assembly to procure legislation because we are not creating any new body. The law content in the oil and gas sector created a local content agency, so it needed to have a legislation to create that with full structure and organisation and perhaps much more regulatory power.

  “What we did is to use our regulation making powers to create obligations in the market. The difference here is that we didn’t need a structure or agency, we created obligations. As part of the licensing commitment of licensees in this industry, they have an obligation to ensure increasing nationalisation of their services, of their employment and of their technology.  And we are leading a process of peer review, which means we create some kind of council, some kind of Board that is made up of stakeholders in the industry that will be advising on what benchmarks should be adopted.

  “We expect that every year, each Disco, Genco and Transco will send in their annual report, some kind of commitment to meet the local content obligation.”

  Comparing the oil and gas sector with the power sector, he noted: “Don’t forget that the difference between the electricity sector and the oil and gas is that everything in the power sector is regulated. Price here is regulated. End user tariff is what backs or stops everything in the market, in the value chain. Therefore, we will be very careful to ensure that the implementation of local content does not also make the sector inefficient. That is critical here.

  “We want to do two sides. We will impose obligations on the utilities and at the same time ensure that there are quality appropriate services to back up that expectation. So, if we ask you to hire Nigerian experts in any aspect, we want to make sure those Nigerians are comparable globally, competitive, capable in best practices, so that you do not get to a grandfather and inefficient industry.”